How Much Is Too Much Life Insurance in California?
You’re moving in the right direction by investing time and attention in figuring out your life insurance needs. This is an ideal way to give your loved ones the financial security they deserve.
But how much life insurance in California is enough? How much is too much? Of course, the answers are different for everyone, but here are a few key factors to help you make your decision.
How Much Life Insurance Should You Purchase?
Use this industry rule of thumb as an idea-starter: Consider buying the equivalent of seven to ten times your current salary. So if you make $50,000 a year, you’d purchase somewhere between $350,000 and $500,000 in death benefits.
While you might keep this figure in the back of your mind, there are other points that should also be added or subtracted from the equation.
What Are the Financial Needs of Your Beneficiaries in California?
Your beneficiaries are those who will receive a payout or death benefit. That group might include your spouse, children, business partners, or whomever you designate.
The death benefit is also known as your policy’s face value. If you have a $500,000 policy, that’s the amount to be paid to beneficiaries upon your death, split however you’ve specified. For instance, your spouse might get half of the payout, and your two children divide the other half.
When you consider the financial needs of your beneficiaries, look closely at their circumstances. If your kids are very young and fully dependent on you financially, you might want a higher death benefit than if they’re all adults with well-paying jobs.
Similarly, a spouse who’s not well educated or has never worked outside the home might require more financial support than one who’s always made a full-time living.
And if you have a large family, you might feel the need for a higher-value policy than if you’re childless, with only a surviving spouse.
You’ll have plenty of decisions like that to make. And California is an expensive state, so you may need to take that into consideration.
How Much Life Insurance Can You Afford in California?
Let’s face it, that’s always a prime factor. Your first choice in a new car might be a Porsche. But budgetary realities might nudge you to downscale your expectations a bit.
What your life insurance in California will cost is based on multiple factors, including age, lifestyle, physical condition, and the type of policy you’ll buy.
Age is important because insurance underwriters figure that the younger you are, the likelier you’ll live long enough to make their investment in you pay off before settlement.
Keep this in mind: you’ll never be younger than you are right now. So don’t put off the decision to buy life insurance while you’re young (or as young as you’ll ever be). The cost will only go up.
Is Term or Whole Life the Way to Go With Life Insurance?
There are various types of life insurance, but most fall into two basic categories: whole life and term life. Here’s a quick description of both.
Much like it sounds, this life insurance offers protection for a designated period or term. For example, if you take out a 20-year term policy, your beneficiaries will receive a payout if you die within those two decades. If you don’t die before that period, the policy cancels, and there’s no payout.
A 20-year term policy might be purchased if young parents seek coverage while their family grows up and gets through the college years. The thinking might be that the kids only need financial protection when they’re young. When they grow up and are established in careers of their own, they will no longer be financially insecure. So the parents don’t need to pay for a policy for the rest of their lives.
Again, much as it sounds, a whole life policy covers your whole life－as long as you continue to make your premium payments. Your beneficiaries are guaranteed to eventually receive a payout (unless you figure out how to fool the Grim Reaper).
A term life policy costs less than whole life coverage. That’s because there’s no guaranteed payout. It will probably be pretty affordable if you’re a 35-year-old healthy non-smoker taking out a 10-year term policy. The underwriters might assume there’s a pretty high chance you’ll still be around by the time you turn 45 and the policy ends.
For that reason, you can likely buy a term policy with a much higher face value than a whole life policy for the same rates. Keep this in mind if your goal is to keep your family as secure as possible when the kids are young. If, however, you want to leave your grown children an inheritance, a whole life policy might be the better decision.
Your Next Step When Deciding on Life Insurance in California
So, where does this leave you? Maybe with more questions than answers, but at least you know what those questions are. Ask an independent life insurance agent for more help.
Independent agents represent multiple lines from major carriers. They’re not restricted to only selling policies from one company. They can go shopping for coverage that meets all your requirements, including the most competitive rates.
Find Affordable Life Insurance That’s Right for You Today
Your independent Cost-U-Less Insurance agent will answer all your questions and help you find quality life insurance in California that’s ideal for you and your loved ones. Call us at (800) 390-4071 or get a quick quote online. You can also find a Cost-U-Less location near you for a face-to-face meeting.